RBC Capital Markets Transportation and Industrials Conference

Transcription

1 RBC Capital Markets Transportation and Industrials Conference December 1, Cautionary Information This presentation and related materials contain statements about the Corporation s future that are not statements of historical fact, including specifically the Corporation s outlook regarding: economic conditions and growth opportunities; future safety and operating performance; future capital investments; and its ability to generate volume leverage, increase returns to shareholders, and attract new business. These statements are, or will be, forward-looking statements as defined by the Securities Act of 1933 and the Securities Exchange Act of Forward-looking statements also generally include, without limitation, information or statements regarding: projections, predictions, expectations, estimates or forecasts as to the Corporation s and its subsidiaries business, financial, and operational results, and future economic performance; and management s beliefs, expectations, goals, and objectives and other similar expressions concerning matters that are not historical facts. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times that, or by which, such performance or results will be achieved. Forwardlooking information, including expectations regarding operational and financial improvements and the Corporation s future performance or results are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statement. Important factors, including risk factors, could affect the Corporation s and its subsidiaries future results and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements. Information regarding risk factors and other cautionary information are available in the Corporation s Annual Report on Form 10-K for 2009, which was filed with the SEC on February 5, The Corporation updates information regarding risk factors if circumstances require such updates in its periodic reports on Form 10-Q and its subsequent Annual Reports on Form 10-K (or such other reports that may be filed with the SEC). Forward-looking statements speak only as of, and are based only upon information available on, the date the statements were made. The Corporation assumes no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information. If the Corporation does update one or more forward-looking statements, no inference should be drawn that the Corporation will make additional updates with respect thereto or with respect to other forward-looking statements. References to our website are provided for convenience and, therefore, information on or available through the website is not, and should not be deemed to be, incorporated by reference herein. 2 1

2 Conference Agenda Business Update Franchise Strength Longer-Term Outlook, Drivers Driving Increased Shareholder Value 3 Solid Finish to 2010 Volume Recovery 7-Day Carloading Trends (000s) Fourth Quarter Volume* (Revenue Carloads) 200 Industrial +22% January December * Chemicals Automotive Agricultural TOTAL +10% +8% +5% +4% +2% +9% *As of 11/27/10 4 2

3 Excellent Service Performance Safety Focus Consistency and Reliability Delivering on Strong Value Proposition Near-Record Service Levels Service Delivery Index Customer satisfaction (000s) * (MPH) Day Carloads AAR Velocity *As of 11/27/10 5 The Strength of a Unique Franchise Seattle Portland Oakland Los Angeles Calexico Borders & Interchange Ports Fastest Growing States Nogales Salt Lake Eastport El Paso Denver Eagle Pass Laredo Twin Cities Omaha Dallas Kansas Duluth Chicago Houston Brownsville St. Louis Memphis New Orleans Diverse Business Mix Fastest Growing States Broad Port Access Interchange Traffic & Border Crossings Freight Revenue $11.9 Billion September YTD % Industrial 17% 20% Agricultural 18% Autos 8% Chemicals 15% 6 3

4 Mexico Opportunities Calexico Business Mix $1.2 Billion September YTD 2010 Nogales El Paso Hermosillo Chihuahua Monclova Torreón Saltillo Culiacán Aguascalientes Guadalajara Eagle Pass Laredo San Luis Potosí Monterrey Querétaro Brownsville Tampico 10% Industrial 18% Mérida 3% Automotive 32% Agricultural 27% Chemicals 10% Ferromex (FXE) KCSM Ferrosur (FSRR) Short Lines Manzanillo Lázaro Cárdenas Mexico Veracruz Puebla Coatzacoalcos Salina Cruz 7 International Access Seattle Eastport To/From Asia Portland Twin Cities Duluth Chicago Freight Revenue $11.9 Billion September YTD 2010 To/From Asia Oakland Los Angeles Calexico Nogales Borders & Interchange Salt Lake El Paso Denver Eagle Pass Laredo Omaha Dallas Kansas Memphis Houston St. Louis New Orleans Brownsville To Europe, South America and Africa Other Export 9% Mexico Export 5% Domestic 68% Mexico Import 5% Other Import 13% Ports 8 4

5 Expected Volume Growth Five Year Volume Outlook: Economy Plus Industrial Products Agricultural Automotive Chemicals Base Growth With The Economy Plus Drivers: Excellent service Cost efficiency Truck capacity Outsized benefit of recovering markets 9 Pricing Opportunities Expect Real Pricing Gains Plus UP-Specific Pricing Upside Legacy Contracts ($2 Billion Left to Price)* 2012 $300M 2013 $350M 2014 $100M Price to Market for Legacy Improved Value Proposition Contract Escalators Volume Limits 2011 $750M $500M Remaining Legacy ~70% ~20% All Other ~10% *Based on freight revenue for 12-months ended September 30,

6 Targeting a Sub-70 Operating Ratio 81.6 Operating Ratio* (Percent) Targeting a 65% to 67% Full Year Operating Ratio by E 2011E 2012E 2013E 2014E 2015E *Certain prior year amounts have been adjusted for the retrospective change in accounting principle for rail grinding. 11 Growing Profitability & Cash Generation September Year-to-Date Solid Performance Drives Operating Income and Cash Generation Expect Strong Future Cash Flows Driven By: Volume Value Proposition Cost control Higher cash taxes $2,064 Operating Income (In Millions) $2,502 $2,930 $2,380 $3, $1,957 Cash From Operations (In Millions) $2,345 $3,019 $2,383 $3,

7 Capital Investment Trends Full Year (In Billions) Outlook Locomotives Purchased Annually Total Capital Spending* $3.1 ~$3.2 $2.5 $2.6 Future Growth Capital Projects Blair Double Track Mississippi River Bridge Positive Train Control (PTC) Annual Capital ~17% to 18% of Revenue PTC Replacement and Growth Capital 2011E *Includes Cash Capital, Leases and Other Non-Cash Capital 13 UP s 2011 Drivers Above Trend Volume Growth Revenue Gains Continue Late Year Legacy Renewals ~$3.2 Billion Capital PTC 100 new locomotives Cash Tax Rate Increase Operating Ratio Improvement 14 7

8 Return Focused Operations Growing ROIC Improved Pricing Increased Productivity Project OR & 0 Future Investments Must be Supported by Returns ROIC* (Percent) Industry Cost of Capital E: 10-12%** ~ E *See Union Pacific Web site under Investor Relations for a reconciliation to GAAP ** Based on the Surface Transportation Board s industry calculation 15 Driving Increased Shareholder Value Current Quarterly Dividend Nearly Equals 2002 Annual Payment More Than $4 Billion Dedicated to Share Repurchases Since 2007 Stock Price Outpacing S&P 500, Dow Transports and Major Class 1 Railroads* in 2010 $0.42 $0.50 Dividend Payment History (Per Share) $1.08 $0.98 $0.75 $0.60 $0.60 $0.60 $0.27 $0.33 $0.33 $ Q 2Q 3Q 4Q 2010 *CSX, NS, CN, CP 16 8

9 Question & Answer Session 17 9